Financial statements in the FDD
Financial statements in the FDD are the franchisor’s own statements that a franchise disclosure document must include. In Ontario, O. Reg. 581/00 s. 3 calls for an audited statement, or one meeting review-engagement standards, for the most recently completed fiscal year, subject to the exceptions in s. 3(1)(c), (2) and (3).
The franchise disclosure document (FDD) is the package a franchisor gives a prospective franchisee. The statements in it describe the franchisor, not the franchised location being bought, so they speak to the franchisor’s finances rather than the unit’s.
What the rules say
In Ontario, s. 3(1) of O. Reg. 581/00 offers three routes: an audited statement, a statement meeting review-engagement standards, or a declaration that the franchisor is exempt under a regulation made under s. 13(2) of the Act. A franchisor that has operated for less than one fiscal year gives an opening balance sheet instead (s. 3(3)), and s. 3(2) allows the previous year’s statement for a period after year-end when the latest has not been prepared. Alberta’s Franchises Regulation, s. 3, likewise requires audited or reviewed statements. British Columbia’s Act refers to prescribed financial statements (s. 5(4)(a)).
What to ask
- Which fiscal year the statements cover, and whether they are audited or reviewed
- Whether the franchisor relies on an exemption declaration instead of statements
- Whether they match the signed certificate of the franchisor
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of OntarioGovernmentO. Reg. 581/00: GENERAL
- 02Government of OntarioGovernmentArthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3
- 03Government of British ColumbiaGovernmentFranchises Act, S.B.C. 2015, c. 35
- 04Government of AlbertaGovernmentFranchises Regulation, Alberta Regulation 240/95
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